Big Bank Earnings Breakdown: Full Summaries Of JPMorgan, Bank of America, Wells Fargo Results

Bank earnings are seen as the first real test for the Trump rally as investors are looking forward to what they hope will be higher margins and a more friendly regulatory regime.

XLF since the election:

According to Goldman, the move higher post-election represents investors pricing in a rosier environment than consensus reflects. The bank lists three factors that would lead to a “blue sky” earnings scenario:

Higher core earnings — this assumption includes two rate hikes over and above our forecasts to a Fed Funds level of approximately 215bps (roughly reflecting the Fed dot plot), a normalization of credit losses and a step up in capital markets activity and would lead to 8% upside to our current (2018E) estimates.
Corporate tax reform — a 10pp reduction of the US corporate tax rate to 25% could result in an additional 13% upside to current estimates, and 21% to our estimate for “higher core earnings”.
Finally, the deployment and optimization of capital levels could result in 13% in additional upside.

Here’s a sector snapshot that breaks down the cumulative impact those three factors would have on the bottom line if realized:

(Table: Goldman)

So that’s what we’re shooting for, long-term. Below, find Bloomberg’s summaries of this morning’s Q4 results.

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Via Bloomberg

JPMorgan:

JPMorgan 4Q ex-CVA, tax benefit, legal expense $1.62, est. $1.43; 4Q FICC sales, trading rev. $3.37b vs est. $3.26b; equities sales, trading rev. $1.15b vs est. $1.29b; investment banking rev. $1.49b vs est. $1.59b.

Shares up ~0.4% pre-mkt
“U.S. economy may be building momentum”: CEO Jamie Dimon
- “Opportunity for good, rational and thoughtful policy decisions to be implemented, which would spur growth, create jobs for Americans across the income spectrum and help communities”; JPM well-positioned “to play our part”
- Had double digit growth in deposit, core loan balances, with record credit card sales volume, continued momentum from 3Q in CIB, with strong markets results “across products”
- Grew market share in “virtually all” businesses, “showed expense discipline while continuing to invest for the future”
Outlook (slides page 10):
- Sees 1Q NII up “modestly” q/q
- Sees 1Q consumer, community banking expense up $150m q/q
- Sees 1Q commercial banking expense $775m
- Sees 1Q asset mgmt rev. slightly <$3b
Average core loans up 3% q/q, 12% y/y
In Consumer, provision for credit losses $949m, down $89m, driven by net reserve release, largely offset by higher card net charge-offs
- Includes $425m mortgage banking release, $25m release in student loan portfolio
- Partially offset by build of $200m, including $150m in card, $50m in business banking, driven by loan growth
Mortgage banking net rev. $1.69b vs $1.87b q/q
Card, commerce solutions, auto net rev. $4.56b vs $4.74b q/q
$2.1b of net shr repurchases

Bank of America:

BofA shares up 0.5% pre-market after reporting 4Q adj. EPS 40c vs est. 38c, FICC trading rev. ex-DVA $1.96b vs est. $2.12b, equities trading rev. ex-DVA $948m, est. $943.7m; CFO sees higher NII in 1Q.

FTE Revenue ex DVA $20.33b vs $20.76b est.
BAC is “lending more and seeing historically low charge-offs”; rev. was up “modestly,” but EPS grew as BAC continued to manage expenses, create operating leverage: : CEO Brian Moynihan
- “Strong leadership positions” in businesses against “backdrop” of rising rates means BAC “well-positioned to continue to grow and deliver for our shareholders in 2017”
“Strong” client activity, good expense discipline created “solid” operating leverage in quarter; though recent rise in interest rates “came too late” to impact 4Q results, BAC expects “significant ” increase in net interest income in 1Q: CFO Paul Donofrio
- Still focused on delivering value to shareholders “as evidenced by” announcement to increase planned repurchases for 1H from $2.5b to $4.3b
Total credit/debit card spending up 6%
Efficiency ratio 53% vs 58% q/q
Overall credit quality “remain strong,” with improvements in consumer and commercial portfolios; net charge-offs $880m vs $888m q/q
Provision for credit losses down $76m q/q to $774m, driven by improved asset quality in commercial portfolio, particularly energy
- Net reserve release $106m vs $38m q/q, driven by better consumer real estate, energy exposures
- Reservable criticized commercial exposures $16.3b vs $16.9b q/q
Total client balances up 10% to $1.0t
- Total mortgage production up 29% q/q to $21.9b
- New U.S. card accounts 1.13m vs 1.32m q/q
- 21.6 million mobile banking active users, up 16%; 19% of deposit transactions completed via mobile devices
Global wealth, investment mgmt rev. down $101m to $4.4b